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Sharp Erosion in Infosys’ Market Value

The chaos at the top has resulted in a sharp corrosion in the market value of Infosys. This in turn has caused the proportion of liquid assets in the company’s market capitalisation to jump to 19.5%. It means liquid assets including cash, bank deposits, and investments in available-for-sale financial assets now represent nearly one out of every five rupees of the company’s market cap.

During heydays of 2005-2007, the ratio used to be 5-7%. The current jump reflects the investors’ dull near-term expectations about the company’s growth prospects amid the crisis in its leadership team.

Since Friday, when its CEO Vishal Sikka announced his sudden exit, Infosys, the country’s second-largest software exporter, has lost 14% in stock value and over Rs 33,000 crore in market cap.

While the liquid assets-to-market cap ratio has shot up for Infosys, it is not the highest among peers.

Wipro is at the top spot with liquid assets forming over 26% of the market cap -that’s one out of every four rupees of market cap. For other peers including TCS and HCL Tech the ratio is 6.1 and 4.3, respectively.